Amounts Owed reflects how much you owe each creditor individually and in total. It includes your utilization rate for revolving lines of credit (e.g. credit cards). Approximately 30% of a FICO® Score is based on information which evaluates indebtedness. In this category, FICO® Scores take into account:
- The amount owed on all accounts.
- The amount owed on different types of accounts.
- The balances owed on certain types of accounts.
- The number of accounts which carry a balance.
- How much of the total credit line is being used on credit cards and other revolving credit accounts.
- How much is still owed on installment loan accounts, compared with the original loan amounts.
Credit utilization, one of the most important factors evaluated in this category, considers the amount you owe compared to how much credit you have available. For example, if you have a $2,000 balance on one card and a $3,000 balance on another, and each card has a $5,000 limit, your credit utilization rate would be 50%. While lenders determine how much credit they are willing to provide, you control how much you use. FICO’s research shows that people using a high percentage of their available credit limits are more likely to have trouble making some payments now or in the near future, compared to people using a lower level of credit.
Having credit accounts with an outstanding balance does not necessarily mean you are a high-risk borrower with a low FICO® Score. A long history of demonstrating consistent payments on credit accounts is a good way to show lenders you can responsibly manage additional credit.